Greatland Gold PLC (AIM:GGP, OTC:GRLGF) said partner Newcrest will have to pay US$60mln to acquire an additional 5% stake in the Havieron gold project in Western Australia after a ruling by an independent arbitrator.
A failure of the two parties to agree on a price meant an adjudicator was appointed as stipulated when Newcrest initially bought into the prospect in 2019.
Newcrest now has 30 days to make a decision on the option, which, if it goes ahead, would increase its holding in the Havieron project to 75%.
Shaun Day, Greatland’s managing director, said the decision reflected a value uplift of five times compared to the stage 1 pre-feasibility study published in October 2021, but did not in Greatland's view “represent a true market value for Havieron”.
Day said the determination of the option price of US$60m was set in December 2021 and based on the “highly prescriptive process and principles agreed in the March 2019 Havieron Farm-In Agreement and November 2020 Havieron JVA”.
According to Day, that meant the adjudicator had a binary choice between the option prices proposed by each of the two parties and therefore was not permitted independently to determine a different option price.
“The JVA included a number of valuation principles, including in respect of commodity prices, which Greatland considers materially impacted its ability to advocate for a higher option price.”
Only geological data available at the time was considered, he added, with subsequent drilling and development progress at Havieron excluded.
Even so, he said: “Greatland looks forward to working to realise the tremendous opportunity at Havieron to develop a low risk, low capex and world-class gold-copper mine.
“The substantial uplift demonstrates the value creation trajectory of Havieron is exceptional with an upcoming expanded Feasibility Study, the future potential to define the bulk mine zonations and the continued benefit from the ongoing growth drilling to deliver exploration success.”
Exploration update
Separately, Greatland Gold noted the latest exploration update from Newcrest at Havieron, where seven drill rigs currently are on-site focused on in-fill and step-out exploration.
Day said: “Havieron's extensive growth drilling program continues to identify and expand high-grade extensions to the mineralisation in the Eastern Breccia, South-East Crescent Zone and Northern Breccia.
"Eastern Breccia growth drilling continues to expand and define the mineralised footprint and extensions of the zonation.
“This Eastern Breccia drilling includes a new northern-most high-grade intercept.
“The observed grade from this drilling reinforces the potential for the Eastern Breccia corridor to host Crescent style high-grade mineralisation.”
Greatland added that works are ongoing to progress the necessary approvals and permits required to commence construction of the infrastructure which will support production at Havieron.
“Newcrest is reviewing the impact of inflationary pressures on future capital expenditure and operating costs as part of the Feasibility Study, with value engineering and other cost mitigation strategies underway,” said the statement.
"The schedule for first ore continues to be reviewed and will be updated with the release of the Feasibility Study, which remains on track for completion during the December 2022 quarter."
Greatland Gold shares rose by 13% to 11.4p.
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